China’s central bank warned against betting on its currency after the yuan plunged to the record low since the 2008 global financial crisis. 

The People’s Bank of China (PBOC) said in a statement on Wednesday, “Do not bet on one-way appreciation or depreciation of the yuan, as losses will definitely be incurred in the long term.”

It said, “Don’t gamble on one-way appreciation or depreciation of yuan. Such gambling will eventually end up with a loss.” 

The bank added that it had “plenty of experience” in dealing with “past external shocks, and it can effectively manage market expectations.”

However, the warning did not help the onshore yuan from sliding for an eighth day to as low as 7.2521 per dollar.

According to Reuters, a trader at a Chinese bank said that because the dollar appreciated against many major currencies, efforts by the PBOC officials to prevent the yuan’s depreciation had a limited impact.

Moreover, unlike many other central banks which tighten their monetary policies to tackle surging inflation, the PBOC has been loosening its policy to help China’s battered economy.

This month, the onshore yuan has decreased over 4% against the dollar, heading to the worst annual loss since 1994. On Wednesday, the onshore yuan plunged to the lowest level since 2008.

Earlier this week, to slow down the yuan’s drop, the PBOC announced that it would raise the risk reserves requirement to 20% from 0% for financial institutions when they buy foreign exchange forwards.

The move made it costlier for investors in the derivatives market to bet against the yuan, helping to slow its decline. 

This year, the yuan has lost over 12% against the dollar.

Sign up to receive our latest news!

By submitting this form, I agree to the terms.